Experts are warning that ongoing securitization of key funds by the current administration could affect funding of essential social programmes in the future on the back of persistent revenue shortfalls.
Speaking at a forum organised by the Kenya Editors’ Guild (KEG) and the International Republican Institute (IRI), the experts said Kenya risks eroding its ordinary revenue collection base due to the government having already leveraged the funds to carryout infrastructure projects across the country.
One of the key funds which has been securitized is the Road Maintenance Levy Fund where the government has committed Ksh 7 per litre of fuel to enable construction and completion of various road projects across the country.
“That means automatically, every citizen who is consuming fuel either directly or indirectly is paying Ksh 7 per litre to repay that debt and the more we securitize those revenue streams, we are utilizing future revenues today and it means we are taking some policy decisions that cannot be reversed even by future governments because we have already tied out revenues into those securitized those debt instruments,” said Alexander Riithi, Head of Programs at The Institute of Social Accountability (TISA).
Riithi also called out the mechanism in which the securitization by the government is being undertaken, given that it has been done off-balance sheet with minimal or lack of input by Parliament.
He said Kenya ought to establish a regulatory framework to guide securitization of the funds which also guarantees public participation besides ensuring the terms of the agreements are available to the public.
“The one big challenge with securitization currently is that it is being done in very opaque circumstances. There is not public participation, nobody knows about securitization until it comes to your bill. So what securitization is doing, it is increasing your cost of doing business or cost of living,” he added.
The International Monetary Fund (IMF) already placed a caveat on the financing model which it argued should be part of the Kenya’s total outstanding public debt.
The use of the funds as collateral has also been put under scrutiny amid missing of collection targets by Kenya Revenue Authority (KRA), a factor which drives up public debt due to extra borrowing to plug the deficit.
As at the end of June this year, total public debt stood at Ksh 13 trillion out of which domestic debt amounted to Ksh 7.33 trillion and external debt Ksh 5.68 trillion.
“The truth is for every Ksh 100 of that debt, 55% is actually domestic. So we owe more to institutions in Kenya than is owed to foreigners,” said Kwame Owino, Chief Executive Officer at the Institute of Economic Affairs.
In the fiscal year 2024/25 Kenya reported a budget shortfall of Ksh 1.2 trillion and is expected to further widen in the current year due to the General Election next year.
